West Midlands Weekly Economic Impact Monitor Issue 54 Publication Date 14/05/21 This monitor aims to pull together information across regional partners to understand the impacts of Covid-19 on the economy. Where possible it will utilise all forms of quantitative and qualitative intelligence. However we urge caution in the use of the contents as this is an emerging situation. This week we welcome Andy Street back as Mayor. Following the easing of restrictions signs of recovery and opening up hopefully signal a new positive phase in the pandemic. We are also pleased to let readers know that the WMCA approach through the Monitor and the State of the Region has received recognition from the What Works Centre for Local Economic Growth for our approach in ensuring good data and intelligence is fed into the decision making processes locally. Last week in the local council elections across England the Conservatives made significant gains. After 143 local councils declared the results the Conservatives had control of 63 Councils (making a gain of 13), whilst Labour now control 44 councils (a reduction of 8), and the Liberal Democrats have control of 7 (gaining 1). The key Bills and announcements in the Queen’s Speech include the following: Infrastructure and Levelling Up - which will set out interventions to boost prosperity across the country; New powers to build and operate the next stage of the HS2 rail line are contained in the High Speed Rail (Crewe-Manchester) Bill; Borders and security; A Product Security and Telecommunications Infrastructure Bill setting out extension of 5G mobile coverage; A Subsidy Control Bill - setting out post- Brexit regulations on how the government can support private companies, now the UK has left the EU's "state aid" regime; a Procurement Bill replaces EU rules on how the government buys services from the private sector; Tax breaks for employers based in eight freeports to be set up in England later this year; and A new UK agency to search for scientific discoveries will be established by the Advanced Research and Invention Agency Bill. Signs of Recovery and Resilience The relative buoyancy is reflected in recent surveys and monitors, such as the latest Business Barometer from Lloyds Bank Commercial Banking. This suggested that business confidence was up, surging across the East and West Midlands in April. According to a study by the Federation of Small Businesses (FSB), confidence levels in the amongst small businesses in the West Midlands are amongst the highest in the UK There was positive growth in West Midlands GDP for three sectors in 2020 Q3, with production increasing by 14.9%, services by 16.0% and construction by 38.3% from the previous quarter. The Chambers of Commerce suggests some stabilisation within international trade in their latest research, 20% of West Midlands’ businesses surveyed reported an increase in international sales compared with 17% the previous quarter. According to the latest KPMG and REC, UK Report on Jobs the number of permanent staff appointments accelerated during April amid reports that businesses were increasingly confident about market demand as COVID-19 restrictions were lifted further. There was a 1% drop in footfall in the 1st week of May (74% of 2019 figure). Retail now at 97% of the previous levels, but shopping centres (70%) and high streets (65%) still down. New company incorporations at the UK level are up on last week and this time last year at 15.4k. CBI’s 2020 report Reviving Regions highlights that the region should identify and close skills gaps working with business; Improve reliability and capacity of infrastructure; Inspire innovative businesses to invest by improving access and supply of R&D and innovation support. The COVID Recovery Commission argues that there should be five main goals in recovery, including creating a globally competitive industry cluster in every region of the UK and rolling out Local Area Energy Plans. The goals emphasise private businesses embracing their role in society, tailored responses to different regions, and accountability. It has been announced that Clearabee, the UK largest on demand waste clearance company, is moving its new headquarters to the IM Properties’ The Hub scheme in Witton. Seventeen companies from across the West Midlands region have been given a Queen's Award for Enterprise. The class of 2021 again comes from a broad mix of sectors including tech, manufacturing and healthcare. Proposals for a Gigafactory at Coventry Airport have accelerated following the launch of a public consultation on 12th May. Spanish electric vehicle brand Silence has opened its headquarters, training centre and first UK retail store in Solihull. 200 jobs will be created. The owner of the NEC Group, Blackstone Group, has made a £1.2 billion bid to buy one of the region’s biggest development and regeneration companies, St Modwen The WM Weekly monitor is funded by the West Midlands Combined Authority, Research England/UKRI 1 Covid impacts – it remains difficult to attribute impacts to Covid versus EU Exit, and in the future we may never be able to separate them. However, the Covid impacts of lockdown and reopening are having a wider more significant effect, which could be masking EU Exit effects as businesses deal with Covid impacts first. Deaths and estimated infections rates continue to decrease nationally and in the region Personal wellbeing scores broadly match the UK. 1 in 3 survey respondents often feel lonely, but 50% hardly ever feel lonely. Depression affects a great new of adults and a rising number of children in Britain, with ONS data showing that one in five adults say they have experienced some form of depression during the pandemic. This rate has doubled since the pre-pandemic rates. Due to restrictions and changes in health service use, individuals have not been seeking medical help, with the number of GP- diagnosed cases of adult depression falling by 29.7% between March to August 2020. The reasons for this increase are likely to be complex, with the impact of lockdown and social distancing, high levels of anxiety around Covid-19 (including returning to work following the vaccine campaign), along with recent bad weather and shorter daylight hours. As we return to some of the pre-pandemic normalities this may cause increased anxiety, as many people have not experienced being part of large groups for over a year and returning to the office may increase anxiety for some, especially with regards to commuting using public transport. The Bank of England (BoE) Monetary Policy report for Q1 2021 has found that the third lockdown from the beginning of 2021 depressed the growth of the economy. Spending by businesses and households fell as some firms had to close again. However, the fall was smaller than that of the first lockdown. As more people are vaccinated, the restrictions around social distancing are lessoned and more businesses are allowed to reopen. The result is that individuals who have saved under lockdown, due to not being able to spend as normal, are expected to boost the economy massively once all social distancing and lockdown restrictions are removed; and more normal spending patterns return. Latest Quarter on Quarter GDP analysis shows for the West Midlands region there was negative growth of 20% in 2020 Q2, compared to the UK negative growth of 19%. This was followed by positive GDP growth in 2020 Q3 in the West Midlands region by 16.8%, slightly behind the UK positive growth of 16.9%. Compared to a year earlier (2019 Q3 to 2020 Q3) GDP analysis shows for the West Midlands region there was negative growth of 11.3%: the highest negative growth seen across all twelve regions. Over the same period, for the UK there was negative growth of 7.5%. Furloughed workers down by 10% (Feb to March). Accommodation and food account for about 1 in 4 workers furloughed. There is still concern in the region around potential job losses once the Government’s furlough scheme finally comes to an end in September 2021. This is particularly relevant given that companies will soon have to contribute more to furlough pay. Recently 40% of businesses in the arts, entertainment and recreation industry had their workforce on furlough leave. A Demos report commissioned by Legal & General has found that areas with more remote working are likely to see higher levels of local spending, suggesting that hybrid working is key to the Government’s plans for regeneration after the pandemic. 36% of people plan to spend more money locally than they did before the pandemic. Among people required to work from home, this rose to 47%. According to the Business Distress Index there was a 15% increase (93,000) in SMEs in significant financial distress in the UK in the first quarter of 2021; 714,000 SMEs are now in significant financial distress: a 211,000 increase since the first lockdown in March 2020; a 24% increase in industrial transportation & logistics SMEs in significant distress in Q1 2021, now 27% higher than at the start of the health and economic crisis. Last quarter witnessed a 33% increase in start-ups in significant financial distress. SMEs in significant financial distress now employ over 3.2 million people More than a Score argues that the pause in SATs during the pandemic has been good and should not be reintroduced, supported by the views of teachers, head teachers, parents, and children. 24% of UK businesses intend to increase homeworking as a permanent business model going forward; 28% reported they were not sure. The information and communication industry (49%) and the professional, scientific and technical activities industry (43%) had the highest percentages of businesses intending to use increased homeworking as a permanent business model going forwards.